By Benadeta Mwaura - Reporter
Kenya, July 3, 2026 - The Kenya Pipeline Company (KPC) has asked the High Court to dismiss a KSh10.9 billion compensation claim filed by Lebanese contractor Zakhem International Construction, arguing that the long-running dispute over the Line 1 replacement pipeline was fully settled through a court-approved consent agreement reached in 2023.
In court documents filed through Wekesa & Simiyu Advocates, KPC maintains that Zakhem's claim for US$84.1 million (approximately KSh10.9 billion) is legally untenable because all outstanding issues arising from the 2014 Line 1 Replacement Project were resolved through negotiations, a consent judgment and subsequent payments.
The company argues that the contractor is attempting to reopen matters that have already been conclusively settled.
The claim comprises US$19 million in alleged unpaid contractual dues linked to extension-of-time claims and US$65.1 million in accrued interest, which Zakhem says arose from delayed payments during construction of the Mombasa-Nairobi petroleum pipeline.
The contractor argues that prolonged project delays, allegedly caused by KPC, entitled it to additional compensation beyond the original contract value.
However, KPC insists the matter cannot be litigated afresh.
According to the state-owned pipeline operator, "all claims relating to Contract No. SU/QT/032N/13 would be deemed fully and finally settled once its terms had been fulfilled," adding that it had fully complied with every obligation contained in the consent agreement.
KPC further argues that the latest lawsuit is barred by the legal doctrines of res judicata, estoppel and limitation of actions, maintaining that substantially similar claims had either been heard by the courts or voluntarily withdrawn by Zakhem in previous proceedings.
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The company also disputes Zakhem's demand for US$65.08 million in commercial interest, saying the original construction contract only provided for interest on overdue payments at 0.5% per month and did not allow interest based on prevailing commercial lending rates as claimed by the contractor.
According to KPC, negotiations conducted between January and February 2023 resulted in both parties agreeing on all outstanding issues before recording a consent judgment in September 2023. The company argues that once those terms were implemented, Zakhem could not institute fresh proceedings unless the consent judgment was first set aside by the court.
The pipeline operator further states that it settled payments arising from an earlier partial judgment, including remittances made directly to the Kenya Revenue Authority (KRA) under agency notices and additional payments executed through court-ordered garnishee proceedings, thereby extinguishing any further entitlement linked to the project.
The dispute dates back more than a decade to the US$484.5 million contract awarded to Zakhem in 2014 to replace KPC's ageing 450-kilometre Mombasa-Nairobi Line 1 petroleum pipeline, one of Kenya's most critical fuel transport infrastructure projects. While the project was completed, disagreements over delays, payment certificates and interest claims have triggered multiple court battles over the years.
The latest case is particularly significant because it comes only months after KPC's listing on the Nairobi Securities Exchange (NSE), making the dispute one of the largest contingent legal liabilities facing the newly listed company. The High Court will now determine whether Zakhem's latest claims survived the earlier consent judgment and whether the contractor is entitled to pursue additional compensation.